08 January 2017

Most Americans Have Made No Economic Progress For A Generation

When it comes to income growth, the United States is nothing like Lake Woebegone. About 90% of Americans are below average.

Labor income growth has been zero for the bottom 50% since 1980 and has been zero for the median man in the U.S. since 1962! Women's median income from labor increased 9-fold from 1962 to 2000, but has been flat from 2000 to the present (the data set only goes to 2014, so this is 14 years of documented flat income).

For those in the next 40% of the income distribution, income has increased an average of 1% per year since 1980.

Those at the top, meanwhile, have prospered with the richest gaining the most.

This paper combines tax, survey, and national accounts data to estimate the distribution of national income in the United States since 1913. Our distributional national accounts capture 100% of national income, allowing us to compute growth rates for each quantile of the income distribution consistent with macroeconomic growth. We estimate the distribution of both pre-tax and post-tax income, making it possible to provide a comprehensive view of how government redistribution affects inequality. Average pre-tax national income per adult has increased 60% since 1980, but we find that it has stagnated for the bottom 50% of the distribution at about $16,000 a year. The pre-tax income of the middle class—adults between the median and the 90th percentile—has grown 40% since 1980, faster than what tax and survey data suggest, due in particular to the rise of tax-exempt fringe benefits. Income has boomed at the top: in 1980, top 1% adults earned on average 27 times more than bottom 50% adults, while they earn 81 times more today.The upsurge of top incomes was first a labor income phenomenon but has mostly been a capital income phenomenon since 2000. The government has offset only a small fraction of the increase in inequality. The reduction of the gender gap in earnings has mitigated the increase in inequality among adults. The share of women, however, falls steeply as one moves up the labor income distribution, and is only 11% in the top 0.1% today.